Q20 Chairman: It seems clear that
the prosecution has not relied on the presumption in recent years
to any great extent, if at all.

Mr Carver: That is almost certainly
true.

Chairman: On individual offences, apart
from the South African model, what is the position in other countries
in Europe? Do they have specific offences as well as or rather
than the global, general approach?

Mr Garnier: To add to that, could I ask
whether other countries claim extraterritoriality for their law?

Q21 Lord Campbell-Savours: Could
you comment on Malaysia.

Mr Carver: I think all three of
us would be floored by your last question. I do not think we are
sufficiently up with Malaysian legislation. The South African
legislation we have examined and that owes at least part of its
origin to legislation that has been presented in Malaysia and
Nigeria, at least some parts of which Transparency International
has contributed to. I suspect we looked in particular at the South
African Bill because it is very recent. The fact is that it is
essentially a common law principle that has been used. It is relatively
clear and simple. We felt it had very many advantages over the
type of scheme of the legislation that had been presented to Parliament.
On the second question about legislation on the continent, the
fact that it comes from a different tradition is less important,
to my mind. Law making today in a world that is increasingly converging
should not rely too heavily on differences of tradition between
common law and civil law. I am quite sure that you, my Lord Chairman,
would endorse that from your own experience. Legislation should,
so far as possible, be comprehensible to anybody in Europe. I
know that, for example, Switzerland has been through an enormous
exercise in trying to reform its legislation because, at a time
when Switzerland played a leading part in concluding the OECD
Anti-Bribery Convention in 1997, there was a consciousness within
the Swiss authorities that their own legislation was hopeless
in terms of criminalising corruption. Therefore, they had to make
a major reform in order to be able to ratify. It was not an easy
process to present and to drive that legislation through, and
I wish that I was in a position to report more accurately what
the result was.

Q22 Chairman: Without going into
detail, in the Community do countries on the whole have specific
offences rather than this global approach or do they divide so
that some do and some do not?

Mr Rodmell: I am not in a position
to comment and I think it might be more helpful if we offer to
supply a paper that perhaps looks at one or two continental systems.
In terms of implementing the OECD Convention, one or two of those
countries have brought that in as a specific offence.

Q23 Chairman: Where you have specific
offences rather than this general offence, how often do gaps appear?
Is it that people escape because, although they are doing things
which are within the general concept of these individual offences,
some clever lawyer manages to persuade the court that they are
not within the individual offence?

Mr Carver: One of the manifestations
of gaps is absence of prosecution. Prosecutors tend to be very
hard pressed. They tend to have too many things on their plate
anyway. If there is an element of doubt as to whether or not they
can bring home this particular charge, they simply will not make
the charge at all. That is part of the problem. Where the law
is unclear, where it simply does not help to comprehend where
an offence has been taken, there will not be prosecutions.

Q24 Chairman: It is not a question
of prosecutions failing but howls from the public that people
cannot be prosecuted?

Mr Carver: I suspect that is where
it manifests itself.

Q25 Mr Garnier: Have there been howls
of that nature in this country recently?

Mr Carver: Howls in the sense
that there is a mounting degree of concern among those involved,
not just NGOs, but those involved with the integrity of the city
and business, that we really are in a very poor state indeed in
terms of legislating against corruption. This brings into play
quite unnecessary risk into business activities which should be
eliminated. This risk element is unacceptable from a narrow perspective
of trying to conduct a business profitably and successfully and
also in terms of colossal waste, particularly in the field that
we are plainly concerned with, which is effective development
around the world.

Q26 Mr Garnier: Is the push coming
for the prosecution of British people and companies for things
they do overseas in order to get contracts or is the push in this
country to catch people for insider trading or taking public officials
on corrupt holidays? I am not sure where the main pressure is
coming from.

Mr Cockcroft: Because this is
an omnibus reform of the law on corruption it is coming from several
different sides presumably because the existing legislation is
considered to be too weak in relation to domestic offences and,
on the overseas side, it is coming from the accumulation of several
international conventions and responsibilities which the UK has.
On the convergence of legislation, particularly on the continent,
it is important to recognise the role of the Council of Europe
Convention on Criminal Law which is designed exactly to bring
the legislation within Member States or the EU accession countries
and so on, into a common framework. That Convention is extensively
based on specific offences. Since we are all trying to move in
that direction, I think that is a very important issue. The UK
is not currently in a position to ratify that or will only ratify
it by making an exception of certain offences such as trading
in influence.

Chairman: We are not only concerned with
what goes on in this country; we are concerned with what people
and companies in this country do overseas in looking at this matter.

Q27 Baroness Whitaker: I wanted to
ask about the reputation risk to companies which have links with
UK companies. In your paper you say that clause 13 should be broader
to include subsidiary countries' joint ventures. I am aware of
an awful lot of shadows over companies which are not direct UK
companies but which are held by them, related to them or have
joint ventures with them. In various kinds of employment law,
the subcontractor is bound by the law and it is the main contractor's
legal duty to ensure that the subcontractor obeys the same law.
Can you expand a little on your recommendation?

Mr Cockcroft: Our central argument
is that United Kingdom prosecutors should be able to prosecute
companies which are responsible for the actions of subsidiaries
or effectively controlled joint ventures, so that very few bribes
or corrupt acts would take place directly from a UK based company
in any country in the world. In nearly all cases, it would be
done through an intermediary. Sometimes that would be a subsidiary.
Sometimes it would be an intermediary agent working closely with
that subsidiary. Even more often, it would be a joint venture
which is rather more difficult to catch, but nonetheless highly
relevant. If we look at the case of IBM in Argentina; IBM Argentina
was found guilty of paying a bribe about two years ago. IBM in
the US finally accepted responsibility for that and paid the fine
to the SEC. These linkages are crucial and we would like to see
this legislation drawn in such a way that, where a UK company
has effective control over a subsidiary, or even a joint venture
partner, that is covered by the Bill.

Mr Carver: The United Kingdom
law against corruption, the mixture of common law and statutory
offences that this Bill proposes to sweep away, has on certain
interpretations been quite tough anyway. The well advised company
for many years now has been set up with commission arrangements
made through a company using probably lawyers in another jurisdiction
that is able to establish a company in this way. There is no formal
link, save for the purpose of being able to deduct the payments
made to the intermediary for tax purposes. That system, which
has been used and multiplied many times over at least 20 or 30
years, is not necessarily brought under control by this Bill.
There is a suggestion that intermediaries will still be left out.
If the Bill is really going to tackle the mischief, most people
who understand the way in which international business is conducted
are aware of the role of intermediaries. I have heard, for instance,
Italian businessmen describe the mechanisms that British companies
have used in order to set up their doubtful payments as being
crude in the extreme and no self-respecting Italian company would
possibly do it this way. We are not tackling that problem.

Q28 Vera Baird: I wanted to ask you
about the comparison between clause 13 and the Anti-Terrorist
Crime and Security Act where clause 13 goes significantly beyond
the offences in the 2001 Act, noting that there have been no prosecutions
under that so far. Why would you say that was?

Mr Rodmell: Perhaps I can take
the second part first, as to why there have not been prosecutions
so far under part 12 of the 2001 Act? There is a practical point
here that it only came into force in February of last year. Certainly
in terms of international corruption, some of these deals take
a long time. If the view is taken, as I know it is, by the Serious
Fraud Office, that every component of that offence has to take
place after 14 February, then there is a time of gestation through
which it has to go. There are a number of other reasons why there
are not any prosecutions yet. There is the question of gathering
the information. The detailed arrangements as between the various
investigative prosecuting authorities have quite recently been
formulated so that each body knows what it is now to be doing.
There is a feeling I have detected within those that should be
prosecuting, within the police, that it is just all too difficult.
They do not have the resources. It is all too expensive. They
do not have budgets. They cannot count on the cooperation of the
country in which the bribe has taken place, which frequently can
be the case, because you are dealing with a country where corruption
is endemic and it is likely that the government authorities will
be closely implicated. We would not under-estimate those difficulties,
but if you have part 12 there, we do not want to think that people
are perhaps collapsing in front of the difficulty. They should
be addressing those points. There is also a belief around that
somehow it is a victimless crime. It is taking place somewhere
else and nobody is damaged; whereas we would say that there are
real victims. If it is referred to police forces, we find that
many of them do not have fraud squads any more, let alone anyone
able to understand corruption. The SFO is dependent on the use
of specialist police being made available. They have some professional
staff but they do not have the police back-up allocated to them
as such. There are a lot of reasons why it does not happen. I
do not think they are getting all the intelligence they could
from the ECGD because the ECGD will tolerate a certain percentage
of every contract deal that they support by way of being reasonable
in the circumstances. If you take a percentage of a multimillion
contract, that is a lot of money. We are not talking about small
payments. They will not inquire into the services that are provided
for those commission payments, so there is work to be done in
that area. I suspect, having looked briefly at the Criminal Bar's
submission to this Committee, in opposing extraterritorial jurisdiction,
the Barno disrespect to members of the BarI do not
think are in touch with the reality of this world where corruption
respects no borders between countries. It is going on internationally.
Simply to make this offence prosecutable at all anywhere it has
to be extraterritorial. Those are some of the reasons why there
is none at the moment. One expects and hopes that, with the information
coming through from the diplomatic posts, perhaps some will shortly
start. We have a concern about the comparison of this Bill with
the 2001 Act, part 12. That came in following 11 September and
had to be done with what was available, and what was available
was the common law and the quaint old statutory offences of 1899,
1906 and 1916. That was very effectively done in very short compass.
Those sections have been capable of being used and have guided
what businessmen will do more for many years. At least those offences,
for what they were, read over into the new international situation.
When you come to look at this Bill, for some of the reasons I
have already illustrated, I think it would be virtually impossible
to prosecute for the foreign element. I am really quite disturbed
when I see the way in which the foreign element is brought in.
It comes in like a side wind. If you look at 6(6) you get: "References
to the public are not confined to the public of the United Kingdom
or of any part of it". You get 11(2) where it says: "It
is immaterial, if(a) the functions of the first person
have no connection with the United Kingdom; (b) the affairs or
business of the second person . . . have no connection with the
United Kingdom.". Legally it probably gets there but why
should there not be a specific inclusion of the offence wherever
it takes place? It is an offence to commit these crimes in any
part of the world. It is a side wind approach and I do not think
it will be as effective as part 12 of the 2001 Act, I am sorry
to say.

Q29 Mr Garnier: Have any of you noticed
in legislation in other countries where they have strict anti-corruption
laws dealing with extra-territorial matters whether a) that has
an effect upon conduct of business and businessmen and women in
those countries and whether b) it has had an effect upon the commercial
culture of overseas countries, or does it purely displace corruption
from American businessmen to French businessmen or from French
businessmen to Italian businessmen or whatever?

Mr Carver: There probably is evidence
to demonstrate that it does have an effect. For example, Germany
was one country that had no foreign extra-territorial element
to its anti-corruption legislation and it was said that Germany
was corruption free on the domestic front but there would be no
inhibition whatsoever in terms of the illegality of paying bribes
to foreigners, that German companies did this as a matter of course,
and certainly I have heard of a former Trade Minister of a British
government make the claim that the German and French companies
bribe foreign officials as a matter of course and therefore it
is essential that British companies should be able to do the same.
This to my mind is not only unacceptable as a proposition but
it is also something that is dealt with and has been dealt with
where countries have taken seriously the transformation of their
domestic law to be able to abide by the obligations under particularly
the OECD Convention and increasingly the other Conventions that
are coming along, not least the UN Convention, in due course.

Mr Cockcroft: I catch the flavour
of your question and as TI, not only in this country but elsewhere,
we are being approached increasingly by large mainly multi-nationals
to discuss with us their approach to the issue of international
bribery and what they might do about that, and of course from
this country BP and Shell are leaders in that field and have set
quite a powerful example. Several inter-related points. First
of all, the Convention covers 80 per cent of world trade so the
countries which are signatories to the Convention account for
80 per cent of world trade, which is quite significant. Secondly,
in some of the countries in which TI is active such as Kenya,
we are finding that, for example, a corporate ethical business
forum has been established and is relating to the new regime led
by President Kibaki. That is a step that was started 10 years
ago and it is not just because of a change of government; it is
something that was planned before the change of government, so
it is a change of mood in the corporate sector. In South Africa
the Corporate Governance Reform Act had a huge impact on businesses
there, including the ones listed here. I think you can see there
has been a change of mood. Most countries that are signatories
to the OECD Convention have only changed their legislation in
the last three years. The Convention was signed in 1997 and ratified
in 1998 so it is still relatively early days.

Q30 Mr Stinchcombe: Just one final
question going back to your side wind argument. Given the terminology
of clause 13 whereby corruption committed outside of the UK is
covered here, could we simplify the Bill by deleting those offending
provisions you referred to 6(6) and 11(2)(a)?

Mr Rodmell: I would want to think
quite long about that. I think that clause 13 is directed more
to jurisdiction, although I have to say 13(3) rather backs up
your argument. I really would not want to make a snap judgment
on that, I would like to think about that.

Chairman: It is already clear to me that
there are questions which will come to us in the course of the
next two or three weeks which we will probably want to ask for
your answers in writing and we will keep that as one of the topics
to which we will come back. We have got a number of other shorter
topics which we ought to try and deal with tonight if only in
item form. One of the things that concerns some people is the
level at which you pitch corruption.

Q31 Mr MacDougall: I think it has
been widely accepted as the CBI's opinion on this that they would
like specific exemptions or defences provided for corporate hospitality
and promotional expenditure as happens in the United States. We
are talking here about facilitation payments and the clear link
between facilitation and corruption and how and whether you bring
about a system where if you did introduce a particular piece of
legislation that covered particular topics. You mentioned level
playing surfaces. The International Development Committee rejected
tolerance of facilitation payments or petty disbursements although
we all accept in certain sectors in Europe and in the United States
this is quite acceptable. I suppose my question leads me to ask
you in your opinion should there be a threshold below which prosecutions
would not apply? Do you think that should be something that should
be considered?

Mr Cockcroft: No, we are against
having a minimum threshold spelt out in any sense of the word,
whether in terms of the question of prosecution or otherwise.
I would like to break down your question between entertainment
and hospitality and facilitation payments because in our analysis
of the issues they are rather different things. Entertainment
and hospitality can edge into trying to influence a particular
deal. Facilitation payments is often presented as a source of
extortion in a difficult developing country where conditions are
overwhelming. We would tend to dispute that extortion is really
the leitmotiv that underlies facilitation payments if I can focus
on that for a moment. You are right to say that the Foreign Corrupt
Practices Act exempts facilitation payments from the Act but we
have done an analysis of how all of the signatories of the OECD
Convention have dealt with facilitation payments in their legislation.
There are at least three different categories: those who outlaw
it completely; those who make an exception; and those who are
ambivalent and where it can be interpreted either way. It is roughly
33 per cent in each category. It seems to us that that differentiation
is not going to be sustainable over a period of time, so it seems
extremely unlikely that the monitoring process that is built into
the OECD Convention is going to allow that situation to continue
indefinitely, because of the competitive level and the alleged
advantage which it gives certain companies. I think in a way,
perhaps more crucially, what we are findingand it relates
to what I was saying five minutes agois that as leading
companies begin to set a pattern on this, others are certainly
going to follow. BP has announced a strategy of zero tolerance.
Motorola in the US had a strategy of zero tolerance about seven
or eight years ago and other companies are certainly going to
follow that mould. It is obviously much easier for a very large
company which has clout to do that and there are going to be exceptions.
We see that as part of the process which is on going. The related
and last point I would want to make on facilitation payments is
that, as one finds in addressing the contents of a Bill such as
this one, it is impossible in terms of domestic legislation to
avoid defining facilitation payments as a bribe. So it is really
only when you apply this to a payment overseas that you can say,
"However in certain circumstances this will not apply up
to a certain sum", so there is a strong element of double-think
in that and as an organisation we are now definitely in favour
of moving away from that exemption.

Q32 Lord Waddington: But would it
not be quite wrong to stigmatise as corrupt the payment, for instance,
of a sum to a foreign official which is made by the payer in the
belief that it is necessary to make that payment in order for
the payer to get his legal rights? Would an ordinary person say
that that was corrupt any more than they would say it was corrupt
of me to say to a baggage handler who had emerged by a carrousel
at London airport, "Here's a tenner. For God's sake go back
behind the carrousel and try and extricate my bag which has not
yet appeared." Nobody in his right mind would say that that
is a corrupt thing. Why is it a corrupt payment therefore for
somebody in a foreign country to pay money to an official because
he knows perfectly well that he is not going to get his legal
rights unless the payment is made? That is what worries me.

Mr Carver: With respect, my Lord,
I am not sure that I can share your analysis, even though you
make it very emphatically, and I do so for two reasons. I have
been struck over the last two or three years in discussing these
problems with major companies how their own analysis of the way
in which they conduct business around the world leads them inexorably
to the conclusion that they have to eliminate the practice altogether
and they have to make that part of the central thesis on which
the company does its business, the elimination of facilitation
payments altogether. That process puts me in mind of a long-established
American client with which I have had various dealings over the
years which has been international for much longer than I have
been in practice, which had for many years a very, very well-established
and elaborate compliance programme which went into this type of
detail in every single respect so there was a procedure for dealing
with these problems every single time they arose. Even though
the maintenance of that compliance programme was one that involved
expense, it had paid off time and time again to make sure that
any problems weree exposed. The test in every case to my mind
as to whether or not this is a corrupt payment or not is if it
is exposed to the person's employer, is it a problem? The invariable
answer is if it is a problem it is corrupt and should not be made
at alltransparency.

Chairman: Perhaps we could move on to
two other topics. We ought to look at public interest defence
and what the mechanisms are for investigating and pursuing bribery
and corruption.

Q33 Lord Campbell-Savours: Do you
feel that the tracking of transfers of money through bank accounts
is a principal investigative tool in large-scale bribery? Do you
regard it as an important tool to use?

Mr Carver: Yes. Recent high profile
cases have demonstrated that this is an essential tool because
many countries now place an enormous, particularly in the developed
world, emphasis on the extent to which they feel that the established
financial markets, and of course we are talking particularly about
the United Kingdom, New York, Switzerland, have in effect stolen
money belonging to them. We need devices to be able to deal with
that accusation because it is not by any means always true; it
just happens from time to time. Certainly the case of the Abacha
funds which were laundered through Switzerland, through London
and through other markets, the ability to track that has been
absolutely essential. Whether or not it is going to produce enough
evidence to convict all the people involved of the necessary offences
still remains to be seen. In the case of Pakistan, for example,
there is more than enough evidence that the previous Prime Minister
had funds translated through financial centres, but that the process
of completing prosecution is very difficult indeed. The availability
of evidence is not going to come, to my mind, unless we have even
more effective anti-money laundering techniques, money laundering
analysis, the ability to capture laundered money, and to capture
the tracing. It is perfectly possible to do because now electronic
money always leaves a trace. The question is just what the requirement
is on banks to do. They will, by and large, do exactly what they
are obliged to do by law, and they will not do any more. It is
very important that the law and regulations governing international
banks are sufficiently clear.

Q34 Lord Campbell-Savours: What about
the investigative journalist, the whistleblower, and accountants
generally, what do you think about their role in all this?

Mr Carver: I have always had great
difficulty with the notion of lawyers, which is the case that
is often cited, being some sort of sacred group that should not
be obliged to disclose, I do not accept that at all. It seems
to me that where a lawyer has been engaged, either wittingly or
unwittingly, in a process of secreting funds or hiding themand
it is usually the simple act of creating or giving instructions
to some firm of lawyers in Panama or the British Virgin Islands
to create a company which provides a nice anonymous vehicle for
funds to be translated throughthere is absolutely no excuse
whatsoever why a lawyer or accountant or any other intermediary,
whether governed by a professional code or not, should not disclose
suspicious transactions. It seems to me a totally simple, straightforward
case.

Q35 Lord Campbell-Savours: Have you
any information about the exemption of the intelligence services
in clauses 15 and 16?

Mr Carver: Personally, I see no
justification for it whatsoever but I do not pretend to be an
expert on the intelligence services. I find it disturbing to find
it in this Bill but I see no basis and see no justification for
this at all.

Q36 Lord Waddington: I think some
time ago you were calling for greater co-operation between the
Serious Fraud Office, National Criminal Intelligence Service and
the FSA. Has there been better co-operation in recent years?

Mr Carver: I think the answer
is yes there has been better co-operation. There have been strenuous
attempts on their part to collaborate more effectively.

Mr Rodmell: Perhaps it is worth
adding, as I did mention earlier, that there does now seem to
be a memorandum of understanding between these various agencies
that says who does what, which must be an aid to greater co-operation.
My impression talking to NCIS is that they are getting rather
better at feedback on suspicious transactions but we have not
really undertaken detailed research.

Q37 Lord Waddington: But which should
be the lead agency in tackling corruption?

Mr Cockcroft: In our view it should
be an expanded SFO. NCIS is obviously in the business of providing
information, the Crown Prosecution Service has many different
duties, and the individual police forces are unlikely to be credible
in this area which is complex especially when there is an international
dimension.

Q38 Lord Waddington: What about this
idea that it should not have to deal with cases involving less
than £1 million?

Mr Rodmell: We are talking there
about serious corruption and putting it on a level with serious
fraud so that basic criterion applies. Clearly if it is below
£1 million, which I think is their criterion, there has to
be a case for a less well-equipped, in terms of investigative
powers, body to deal with it. But maybe one should be thinking
about increasing the powers of whoever is going to deal with it,
whether it is the Crown Prosecution Service, the police, or whoever,
so that they can cope with it. But where there is an international
dimension, even if you are dealing with quite a low level of bribery,
I think the Serious Fraud Office would take on a fraud case for
even less than £1 million if it was complex, particularly
because of the overseas element. I think the same should apply
to corruption. I personally think it is a nonsense that there
is no express jurisdiction for the SFO to deal, not only with
fraud, but with corruption and money laundering and other types
of economic crime which typically are cross border and operate
disregarding borders.

Chairman: International obligations are
obviously very important in this.

Q39 Mr Garnier: I was just wondering
whether you thought if this draft Bill becomes an Act whether
the Part 12 bits of the 2001 Anti-Terrorism Act are suitably replaced
by relevant parts of the draft Bill?

Mr Rodmell: I tried to indicate
earlier that I think the nature of this Bill would make it virtually
impossible to operate in a situation of foreign bribery, which
is what Part 12 deals with. I would hope that on a significantly
redrafted Bill, that would be less of a problem, because it would
make more sense to have all of those anti-corruption provisions
in one Bill. But one way of dealing with that, again I hate to
come back to specific offences, is to have a specific offence
dealing with, for example, bribery of foreign public officials
and it would be much clearer and easier even than under the 2001
Act. The way it is at the moment I do not think it will work.